- - Wednesday, July 11, 2012


Between now and Election Day, you will be hearing a lot from Washington interest groups, Capitol Hill politicians and President Obama, demanding that Congress “repeal tax breaks for Big Oil” or “make the oil companies pay their fair share.”

But just because a poll-tested message sounds good in a 30-second ad does not make it true. Nor does it translate into constructive pro-growth policies for the American people and our economic recovery. For example, according to a recent report from Standard & Poor’s ResearchInsight, the effective tax rate for the oil and natural gas industry over the past five years has averaged about 44 percent. Meanwhile, according to their own federal filings, Apple last year paid an effective tax rate of around 24 percent and General Electric paid almost nothing.

At a time when businesses can choose to locate almost anywhere in the world, development of domestic energy resources, by definition, creates jobs right here at home. The job-creation potential of the energy sector, however, is not limited to those in oil and gas extraction. It also means more pipeline construction and the expansion of petrochemical plants, which create both construction jobs and permanent manufacturing jobs. Another example is the increased supply of natural gas in recent years, which has sharply lowered its price and thus incentivized manufacturers, who use it as feedstock, to bring their operations and jobs back home from overseas.

Ronald Reagan once said of the federal government’s misguided attitude toward business: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” It comes as no surprise, then, that one of the most common - and misguided - proposals coming out of Washington has been to institute a Section 199 repeal on oil and gas companies. Section 199 was added to the Internal Revenue Service Code as part of the American Jobs Creation Act in 2004and provides a deduction for U.S. manufacturers that create American jobs. This tax deduction is 9 percent for almost all manufacturers - except for oil and natural gas companies, which receive just a 6 percent deduction. That’s right. American oil and gas companies, which support 9.2 million American jobs, already receive a smaller percentage of the Section 199 tax break than their counterparts in other manufacturing sectors. Singling out oil and natural gas companies to repeal their Section 199 deduction would only lead to closures and downsizing, killing jobs just for the satisfaction of taxing some of America’s strongest job creators. If the goal is tax fairness, repealing Section 199 just for oil and gas companies is a step in the wrong direction.

Opponents of the oil and gas industry will try to tell you that because those companies make so much money, giving them the same tax treatment as other manufacturers is wasteful and unnecessary. But challenging the absurdity of this notion is not just a Republican perspective. Former Rep. Harold Ford Jr., Tennessee Democrat, recently said this to panelist Mika Brzezinski on “MeetthePress”:

Ford:“The reductions enjoyed by the oil companies are enjoyed by all U.S. manufacturers. To single out oil companies at a time when gas prices are high and which our domestic industry …”

Brzezinski: “Eight billion in profits?”

Ford: “Mika, that doesn’t go to a guy named Exxon Mobil. There are people [who] work there. There are shareholders of the company. We don’t have to complain when other large U.S. companies do well. As a matter of fact, we applaud them, as we should.”

Let’s not be disingenuous. Mr. Obama is a politician. He will not risk alienating his environmental base during an election year by supporting domestic energy and gas production. Unfortunately, the biggest losers in his political calculation are the American families who want a paycheck instead of an unemployment check. All they want is to earn enough to buy a house or a new car or to send their kids to college, but that goal is made far more difficult with Mr. Obama standing in the way. We deserve better.

Rep. Bill Cassidy, a physician, is a Louisiana Republican.



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